As a family lawyer or divorce financial expert, there are times when you may be asked to value an annuity.
You may not have software to value an annuity specifically – but if you have software to value defined benefit pension plans, that is all you need!
Need to Value an Annuity? Here’s how.
Just enter the information asked for by the pension valuation software, entering the information about birth dates, payment amount, etc.
Enter the annuity’s payment start date as the retirement date.
The value that is shown for the defined benefit pension will be the value of the annuity.
Why does this work?
Because in both cases, you are simply valuing a stream of payments that will start at a specific time and end at the death of the recipient.
The fact that one stream of payments is being made by a former employer and the other stream of payments is being paid by an insurance company is not material to the value of the stream of payments to the recipient.
If you wanted to exclude consideration of mortality for some reason, you could simply use your tool to value the present value of alimony.
The alimony present value calculation does not take mortality into account.
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